With UPI payments rising 60 times between November 2016 vs 1.6 times for debit/credit card payments to merchants, the Express IT Awards debated whether UPI would cannibalise cards within a few years. What emerged, however, was a larger story, of democratising credit, of digital diplomacy and the value of Big Data.

Belgavi: By 2020, almost 80% of the non-cash transactions will be made using UPI.Sharma: There is a global shift towards a new payment system whose essential characteristic is that it is a platform to enable the flow of more credit — there’s Zelle in the US and Mojaloop in Africa. And for the first time, India is in a leadership role with UPI. We are already doing half a billion transactions every month and it will not be a surprise if it goes up to 2-3 billion a month by 2020.Gupta: There is a cost to cards whereas, at least right now, digital payments are almost free, there are even large cash-backs. Over time, most of the small value payments will move to digital but for higher value, people will tend to use cards still.Asbe: There are around 50-60 million customers on UPI and a similar number for cards. The challenge is to take this 60 million to 300 million. Most of QR codes today are proprietary, we need to move to UPI QRs that are interoperable.Ramachandran: Around 55% of China’s consumption expenditure is in non-cash form while this is a small fraction for India. Rather than getting into cards vs UPI, we need to broaden the pie. Keep in mind, the cost of cash is 2.5% of GDP, so the economy gains as we move towards less cash.

How do you make UPI/card payments grow?

Ramachandran: In India, supply creates demand. Smartphones are doubling up as payment devices, so I believe we will be pleasantly surprised by the growth. India needs more than just one NPCI to do real-time payments, more providers will drive innovation.

Banks don’t want to promote UPI QRs in the way PayTM has done for its QRs

Asbe: The government has been promoting UPI for the last two-and-a-half years and is lowering the MDR to make merchant-adoption easier. Once the merchant and customer are on digital payment, they cannot go back. Once half the country is moved to digital payments, I don’t think the government will need additional investments.Gupta: Increased formalisation of the economy will drive non-cash payments. But, as banks we can’t win over merchants by burning cash like some others are doing.

Is PayTM versus banks the issue?

Sharma: We had lots of firms manufacturing PCs, but Microsoft and Intel remained a constant. Don’t worry about who will own the customer end, focus on the payment system and who owns it is of strategic importance. The US is weaponising its payment system, see what it did to Turkey. We must have our own payment system and can even help other countries develop this because ours in an open system. The MEA needs to move from economic diplomacy to Digital Diplomacy.

Will flow-based lending give a fillip to UPI?

Belgavi: Payments are not an end in itself, they are a means towards an end. And people who may solve that end may not be bankers. A good example is e-commerce. E-lending grew when merchants formalised the payment ecosystem.Gupta: We are financing transporters’ trips based on the E-way bill generated for GST.Sharma: Out of the 8.8 million businesses which are filing GST on a monthly basis, only 1.2 million has bank or NBFC finance. But in three-four years, all the 8.8 million will have some sort of flow which can be mapped. Democratising credit to everyone is the challenge today.

Last thoughts.

Asbe: I don’t find any reason why we can’t process a billion transactions a day.Ramachandran: I warn us against one-size-fits-all approach. It is dangerous to try and force-fit urban, rural, older generations, millenials, all into one homegeneous bucket.Belgavi: UPI simplified the payment eco-system, we need to simplify our infrastructure a lot more and we need to attract very diverse set of people.Sharma: We are embracing a new architechture for innovation. Credit is one example and health stack is another. We are finally getting into an innovation architecture which the world wants to learn from us.Gupta: Digital payments have grown phenomenally, but we do not know the scale. SBI alone processes 10 million UPI transactions a day. So the only way forward is to embrace it.